Russia and Iran sign $30bn energy agreement

Russia and Iran have signed agreements to collaborate on “strategic” energy deals worth up to $30bn that will involve energy groups such as Rosneft and Gazprom. Amir Hossein Zamaninia, Iran’s deputy oil minister for international affairs, said six provisional deals had been signed with Russian oil companies as part of a visit by President Vladimir Putin to Tehran on Wednesday. After years of sanctions, the government of Hassan Rouhani has sought to attract foreign companies to develop Iran’s energy sector.

The latest announcements come as Russia is building up its energy assets in the Middle East, as part of a wider diplomatic push to increase its economic and military clout in the region. Mr Zamaninia said the two countries agreed to “strategic co-operation in the energy sector”, ranging from development of Iran’s oil and gasfields to collaboration on research. Igor Sechin, chief executive of Russia’s state-controlled Rosneft, said its pact with the National Iranian Oil Company would be the first step before a “binding” deal to participate in Iran’s oil and gas projects over the next few years. “According to preliminary calculations, the overall amount of investments in the projects will total up to $30bn. When completed, the production plateau will reach 55m tonnes of oil per year,” Mr Sechin told journalists invited to the signing. Iran is particularly keen to strike deals with western players such Royal Dutch Shell to prove that the US’s hostility toward Iran has not scared off foreign investment.

However, oil experts say that, should the US re-impose crippling sanctions on Iran by the end of this year, Russian and Chinese firms could benefit from the lack of competition from western companies. Moscow has forged a close relationship with Saudi Arabia, Iran’s arch rival in the region, and has leveraged a supply curbs deal with OPEC to strengthen ties with the kingdom in the energy and military sectors. Rosneft has also become a major financial supporter of Kurdistan, by acquiring a majority stake in the main oil pipeline in the northern Iraqi autonomous region. Iran needs $200bn of investments for upstream and downstream projects by 2021. Since Iran struck a nuclear deal with major powers in 2015, enabling many sanctions to be lifted, it has only signed one notable contract — a deal with France’s Total in July worth $4.8bn. Mr Sechin, a close associate

The Oil Company That Lost $800 Billion In Shareholder Value​

China’s biggest oil and gas producer PetroChina debuted on the Shanghai stock exchange in November 2007, becoming the first $1-trillion company in the world.

​Ten years later, almost to the date, PetroChina’s Shanghai-listed shares have dropped by a staggering 82 percent since the IPO, wiping out shareholder value of $800 billion, Bloomberg calculated. That’s more than the current market capitalization of Microsoft, or the value of the entire Italian stock market, or the combined net worth of the world’s 12 richest people, or Switzerland’s GDP—take your pick.​

Since the end of 2007, several factors—domestic and international—have combined to contribute to the biggest individual stock slump in history. And if that isn’t enough, analysts think that PetroChina’s rout on the Shanghai stock exchange is not at the bottom yet.

On PetroChina’s first day of trading on the Shanghai Stock Exchange on November 5, 2007, its share price almost tripled its IPO price and took its market value beyond the US$1-trillion mark, the first time a company had been valued at more than US$1 trillion.

But back then, cracks in the financial system had already started to emerge; the subprime mortgages market collapsed a few months later, Lehman Brothers filed for bankruptcy in September 2008, and the global financial crisis was in full swing.​

The markets hardly had time to recover before the oil price crash of 2014 hit, which has since wiped out a lot of profits and market capitalizations of all oil and gas companies around the world.

Apart from those international market events, PetroChina’s Shanghai-listed shares also suffered from the 2015 Chinese market collapse, when excessive speculation in stocks led to an unsustainable bubble, which the government then suppressed with extraordinary measures and intervention on the stock market. This also wiped out some of the market value of the Shanghai shares of China’s biggest oil producer (PetroChina is also listed in Hong Kong and New York).​

More recently, Chinese policies to boost electric vehicle (EV) use, turn to cleaner energy use, and prevent another stock market bubble from swelling by clamping down on speculative trades have further hurt PetroChina’s shares and made analysts even more bearish on the stock’s Shanghai market performance.

In addition, PetroChina’s stock is expensive in terms of forward price-to-earnings ratio—it trades at a much higher P/E ratio than its peers around the world.​

“Why would anyone want to buy the stock when it’s trading for more than 30 times earnings?” Toshihiko Takamoto, a Singapore-based money manager at Asset Management One, which oversees about $800 million in Asia, told Bloomberg.

Analysts are also surprisingly pessimistic about the forward 12-month performance of PetroChina’s Shanghai shares, expecting a 16-percent downside, while they are typically bullish on large caps. To compare, analysts expect shares in the blue-chip CSI 300 Index to rise by some 10 percent one year from now, according to Bloomberg.

Not everything is bleak for PetroChina’s shares—the ones traded in Hong Kong have better prospects. The latest price target by Hong Kong-based analyst at Jefferies, Laban Yu, suggests that the stock may gain 31 percent in the next 12 months.​

Moreover, the Chinese government, via China National Petroleum Corporation (CNPC), holds the controlling stake in PetroChina and some 12 percent of its shares are listed, which means that the actual impact on minority shareholders may not be as big as the market value loss would suggest.

Nevertheless, the Chinese policy to curb speculative trading and its aggressive push into EVs adoption don’t bode well for PetroChina’s chances to offset most of the market value loss that its Shanghai stock has sustained over the past decade.​

Company previously missed deadline to pay nearly $12 million to bondholders

Coal-mining company Armstrong Energy Inc. filed for bankruptcy on Wednesday with a plan to turn over ownership of its struggling operations to a competitor and its lender. The St. Louis company plans to use the chapter 11 process to transfer the ownership of its five mines and other operations to a new entity owned by Illinois coal company Knight Hawk Holdings LLC and some of Armstrong Energy’s noteholders. Nearly all of Armstrong Energy’s shares are now owned by energy investor Rhino Resources Partners Holdings LLC. The terms of the transaction weren’t immediately disclosed in documents filed in U.S. Bankruptcy Court in St. Louis. Armstrong Energy mines for coal in western Kentucky on land that is estimated to have 445 million tons of proven and probable coal reserves, according to a June 30 report. It also operates three coal processing plants and a river dock coal handling and railroad loading.​

Shell completes $4.4 billion in sales a day before earnings report​

Royal Dutch Shell said Wednesday it made further progress in a major divestment plan by completing the sale of assets in Gabon and in the North Sea.

For $628 million, Shell said it completed the sale of its entire Gabonese oil and gas interests to a company controlled by The Carlyle Group. The transaction includes the sale of all of Shell's onshore oil and gas interests, which includes nine total fields, and the associated infrastructure, including pipelines and export terminals.​

Shell last year produced an average 41,000 barrels of oil equivalent per day from Gabon. When disclosing the intention of the sale earlier this year, Andy Brown, a director for Shell exploration and production programs, said the decision "was not taken lightly."

French energy major Total in February said it was taking advantage of improved market conditions by selling mature assets in Gabon to Anglo-French company Perenco for $350 million.​

In a separate statement, the Dutch supermajor said it completed the sale of North Sea holdings to Chrysaor for a total of up to $3.8 billion. The sale includes Shell's 21.7 percent interest in the legacy Buzzard field and the 10 percent stake in the Schiehallion field.

BP has produced nearly 400 million barrels of oil from Schiehallion since production started in the late 1990s and the company said redevelopment could yield another 450 million barrels and extend the field's life into the 2030s.​

Phil Kirk, the chief executive at Chrysaor, said in a statement the company is now a leading exploration and production company in the North Sea with the acquisition, which puts about 120,000 net barrels of oil equivalent per day in its pocket.

"With improving operating costs, competitive fiscal terms and a world class skills base, the North Sea is undergoing a period of rejuvenation," Chairperson Linda Cook added.

Shell said the sales show "clear momentum" behind the effort to shed $30 billion in assets and "re-shape the company into a world class investment." The company reports its third quarter earnings on Thursday. Net profit for the second quarter was $3.6 billion, up from the $1 billion reported for the second quarter 2016. From the first quarter, however, net profit is down about 4 percent.

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